Aurelia Butler

Good morning, and we begin today with our continued focus on Nancy Pelosi’s historic trip to Taiwan.The House Speaker pledged to “always” stand by the country and not “abandon” it during a meeting with Taiwan’s president Tsai Ing-wen.“America made a bedrock promise to always stand with Taiwan, and this visit is a reminder of that,” Pelosi said at the presidential office in Taipei today.The visit has enraged China, which has announced it will begin live fire military exercises in the waters around Taiwan from Thursday until Sunday after Pelosi has left.The drills could amount to a blockade of a country whose economic lifeblood comes from exports and which is highly reliant on energy imports.Meanwhile, the commercial ramifications from Pelosi’s trip have already begun. The China customs administration has suspended imports of more than 2,000 food products from Taiwan. The move is seen by observers as the start of a campaign by Beijing to punish Taipei for Pelosi’s visit.But Tsai praised Pelosi’s visit “under such challenging circumstances” and said it boosted public confidence in the strength of her country’s democracy.Pelosi, the second in line to the presidency after vice-president Kamala Harris, is the most senior US politician to visit Taiwan for a quarter of a century. She is due to leave for South Korea late in the afternoon.Thanks for all your comments on this topic. Here are a selection from FirstFT readers submitted ahead of Pelosi’s arrival in Taiwan:“We need to stand firm with Taiwan and other democratic forces in Asia, against intimidation from the Chinese Communist Party.” David Tran, MD, Washington, DC“[The visit] makes the US look weak and disjointed with “no one in charge” in the name of democracy.” Mitchell Harris, Sunapee, New Hampshire“It’s a slippery slope if we start letting China or any other country influence our relations with other countries.” ML Thompson, Central IllinoisForeign countries shouldn’t dictate the travel plans of politicians from other countries, regardless of the political sensitivities. Ravi Ramdas, Oklahoma City, Oklahoma.Let Pelosi skip this trip but if we are serious about keeping Tawain our ally send a bi-partisan delegation this fall. Jeffrey Herrmann, St. Petersburg, FloridaThanks for reading FirstFT Americas. Here’s the rest of the day’s news — GordonFive more stories in the news1. Kansas voters reject anti-abortion amendment to state constitution According to a projection from the Associated Press, voters in Kansas overwhelmingly rejected the Republican so-called Value Them Both amendment that would have paved the way for lawmakers to ban or restrict abortion in the state. For news from the midterm primary elections go to our live blog, which will keep you updated as results come in.2. Bain barred from UK government contracts The Boston-based global management consultant was hit yesterday with a three-year ban from tendering for British state contracts because of its role in the “state capture” scandal in South Africa. Britain is the first western country to impose such penalties on Bain and there is already pressure on the US to follow suit.3. Robinhood to slash headcount by 23% The brokerage announced yesterday it was letting go 780 employees, almost a quarter of its workforce, as part of a reorganisation that would result in the closure of two offices. Shares in Robinhood have fallen nearly 75 per cent since its public listing last year as the stimulus-fuelled trading boom has lost steam.4. Uber reports positive cash flow for the first time There was better news from Uber, which recorded its first-ever cash flow positive quarter. The ride-hailing app has burnt through $25bn since it was founded 13 years ago in its rush towards rapid global expansion but yesterday said it generated $382mn in the three months to the end of June.5. Shale patch pioneer Chesapeake is to ditch oil The company most associated with the dramatic ups and downs of the US shale industry is taking another gamble: it is planning to offload prized oil assets and double down on American natural gas. Demand for US liquefied natural gas exports is surging after Russia’s invasion of Ukraine and the resulting sanctions on oil and gas from Russia.The day aheadOpec+ meeting Oil producing countries meet today to determine production levels following pressure from the US and other western countries to increase output and help bring down prices ahead of the northern hemisphere winter. Oil prices were hovering around $100 a barrel ahead of the meeting.Economic data Durable goods orders are expected to have jumped 1.1 per cent in June from 1.6 per cent the previous month, according to economists polled by Refinitiv. Durable goods orders unexpectedly rose in June because of a surge in orders for defence aircraft and parts. But activity in the services sector is expected to have weakened in July, according to the Institute for Supply Management’s non-manufacturing index.Company earnings Biotech company Moderna, pharmacy chain CVS, media company New York Times, sportswear company Under Armour and biotech group Regneron are among those reporting earnings before the bell today. Ecommerce site eBay, cleaning goods manufacturer Clorox, and insurance companies Allstate and MetLife report after Wall Street’s closing bell.Asean foreign ministers meeting South-east Asia foreign ministers will gather in Phnom Penh today to discuss violence in Myanmar, the war in Ukraine and Beijing’s growing ambition in the region. US secretary of state Antony Blinken and Russia’s foreign minister Sergei Lavrov both plan to attend. Join us on Saturday, September 3 in person or online for the FTWeekend Festival, featuring a day of debates, tastings, performances and more. Hear from speakers including Great British Bake-Off winner Nadiya Hussain and psychotherapist Esther Perel. Claim £20 off your festival pass using promo code FTWFxNewsletters.What else we’re readingKilling of al-Qaeda’s Ayman al-Zawahiri deals setback to Taliban The assassination of the al-Qaeda leader has revealed Washington’s ability to conduct extensive surveillance and attack in the centre of the Afghan capital and shattered efforts by the government in Kabul to build trust with foreign powers and gain international legitimacy.Go deeper A year after the US withdrawal from Afghanistan the FT has a new series on life under the Taliban.The US ‘friendshoring’ experiment risks making enemies Viewed from abroad, Joe Manchin’s U-turn and the subsequent new deal on climate and clean energy is notable for proposing one of the first apparently genuine examples of “friendshoring” — favouring strategic allies when building supply chains — seen in the wild, writes Alan Beattie.Investors grow frustrated with hedge funds after historic losses Hedge funds are heading for one of their worst years of performance on record, leaving investors frustrated with how many managers have failed to offset sharp falls in equity and bond markets. Funds like Daniel Loeb’s Third Point, which is nursing losses after a bet on software company SentinelOne and electric-vehicle maker Rivian Automotive, are suffering.How Abe’s killing exposes Japan’s thin line between church and state The close historic ties between the ruling Liberal Democratic party in Japan and South Korea’s Unification Church, or Moonies, is widely known but rarely discussed in public. But relations between the two institutions are now firmly back in the spotlight after the assassination last month of former prime minister Shinzo Abe.How listening to uninterrupted noise helped millions to focus Lofi Girl, a music livestream, broadcast uninterrupted for 20,843 hours — more than two years — until YouTube suddenly suspended it last month. These continuous streams are designed for people seeking not silence but peace, writes Dave Lee.Food & drinkFizzy water has bewitched humans since ancient times, writes Alice Lascelles, who reviews the best H2O with bubbles for HTSI. More

The reform championed by the outgoing government of Prime Minister Mario Draghi has triggered protests from lobby groups, especially taxi drivers who were against opening up their sector to broader competition including from multinationals.After Draghi’s national unity administration collapsed last month, measures related to the taxi drivers were removed from the bill following pressure from the rightist parties in parliament.In May Parliament also softened rules to open up tenders for lucrative contracts to manage bars and other facilities on the country’s 7,500 kilometres of coastline.The bill establishes that current concessions remain in effect until the end of 2023. Italian authorities can extend them for a further year to conclude the tender process. Italy is entitled to benefit from more than 200 billion euros in post-pandemic recovery funds from the European Union until 2026, but must pass a series of incremental reforms to ensure the cash continues to flow.The government so far has secured almost 67 billion euros of EU funds. Rome now needs to reach 55 new targets in the second half of 2022 to get the 19 billion euro tranche, something that analysts say might prove more difficult without Draghi at the helm. ($1 = 0.9814 euros) More

In a sign of a tough second half of the year, growth in the world’s largest economy, the United States, shrank for the second straight quarter, while in the euro zone business growth slowed sharply in June due to rising cost of living. LAYOFFS: Company name Date Layoffs impact Commentary Alibaba (NYSE:BABA) Group March 16 About 39,000 staff Started firing employees in February. It discussed job cuts with several business units that month and left it to them to make specific plans, a source told Reuters. Tencent Holdings (OTC:TCEHY) March 16 10%-15% headcount In an internal meeting at Tencent at the end of 2021, CEO Pony Ma told staff the company should prepare for a “winter”, two sources told Reuters. Tesla (NASDAQ:TSLA) Inc June 3 Roughly 10% in “I have a super bad feeling about the economy,” CEO Elon salaried staff Musk said in emails seen by Reuters. JPMorgan Chase (NYSE:JPM) & June 22 Over 1,000 “Our staffing decision this week was a result of cyclical Co employees changes in the mortgage market,” a spokesperson said. Shopify (NYSE:SHOP) Inc July 26 10% of its “Ultimately, placing this bet was my call to make and I workforce got this wrong,” CEO Tobi Lutke said, referring to a bet on post-pandemic growth in online shopping that went sour. Netflix (NASDAQ:NFLX) May 17 150 jobs “While we continue to invest significantly in the June 23 300 jobs business, we made these adjustments so that our costs are growing in line with our slower revenue growth,” the company said. Coinbase (NASDAQ:COIN) Global June 14 1,100 jobs “We appear to be entering a recession after a 10+ year Inc economic boom. A recession could lead to another crypto winter, and could last for an extended period,” CEO Brian Armstrong said. OpenSea July 14 20% of its “The reality is that we have entered an unprecedented workforce combination of a crypto winter and broad macroeconomic instability, and we need to prepare the company for the possibility of a prolonged downturn,” CEO Devin Finzer said. Klarna May 23 10% of its “Since then (2021), we have seen a tragic and unnecessary workforce war in Ukraine unfold, a shift in consumer sentiment, a steep increase in inflation, a highly volatile stock market and a likely recession,” CEO Sebastian Siemiatkowski said. Robinhood (NASDAQ:HOOD) April 26 9% of its “Rapid headcount growth has led to some duplicate roles Markets Inc full-time and job functions, and more layers and complexity than are employees optimal,” CEO Vlad Tenev said. August 2 23% of its full-time “Earlier this year, I announced that we would employees be letting go of 9% of our workforce and focusing on greater cost discipline throughout the organization. This did not go far enough,” Tenev said. Oracle Corp (NYSE:ORCL) August 1 “Thousands” of Starts to cut “thousands” of jobs globally to achieve $1 jobs in global billion in cost savings, a report in The Information said. workforce Regions affected include the United States, Canada, India and parts of Europe. HIRING FREEZES:Company name Date Action taken Commentary Apple Inc (NASDAQ:AAPL) July 18 To slow hiring, The decision stems from a move to be more careful during spending next year uncertain times, though it is not a company-wide policy, in some units Bloomberg News reported, citing sources. Meta Platforms June 30 Cut plans to hire “If I had to bet, I’d say that this might be one of the Inc engineers by at worst downturns that we’ve seen in recent history,” CEO least 30% to Mark Zuckerberg told workers in a weekly employee Q&A ~6,000-7,000 session, audio of which was heard by Reuters. Twitter Inc (NYSE:TWTR) May 12 To pause most CEO Parag Agrawal, in a memo to employees seen by Reuters, hiring, review attributed the decision in part to a lack of confidence in existing job Twitter’s ability to reach aggressive growth targets it had offers to see if set in 2020. any “should be pulled back” Uber (NYSE:UBER) May 9 To scale back “We will treat hiring as a privilege and be deliberate Technologies Inc hiring, reduce about when and where we add headcount,” CEO Dara spending on Khosrowshahi said in a letter seen by Reuters. marketing, incentives Snap Inc (NYSE:SNAP) May 23 To slow hiring and “We continue to face rising inflation and interest rates, push some planned supply chain shortages and labor disruptions, platform hiring to 2023 policy changes, the impact of the war in Ukraine, and more,” CEO Evan Spiegel said in a memo to employees. Amazon.com Inc (NASDAQ:AMZN) July 28 Company is questioning its hiring plans, likely will not hire at same pace as in previous years Intel Corp (NASDAQ:INTC) June 8 Froze hiring in the division responsible for PC desktop and laptop chips Source: Company filings, media reports More

LONDON (Reuters) -The post-pandemic inflation surge clearly persisted too long for central banks to ignore – but investors sceptical of some multi-year regime change or paradigm shift still feel emboldened.After a bruising start to the year, world markets caught a break in July. Some relief was perhaps due after Ukraine-related energy and food price shocks in February compounded a post-pandemic inflation spike and forced months of dramatic re-pricing of interest rate, bond and stock markets. The sort of synchronised monetary policy tightening investors braced for – described by the International Monetary Fund last week as “historically unprecedented” – is now well underway and recession fears mount as economic forecasts are slashed.Rates markets are already peering over the hump and despite all the hawkishness from central banks feel the worst of the episode may have passed – even if visibility is limited for policymakers and investors alike.Futures markets now see U.S. Federal Reserve policy rates peaking by the turn of the year at about 3.35% – about one percentage point above current rates, but also some 65 basis points below where they saw the so-called ‘terminal rate’ in mid-June and now occurring three months earlier than assumed back then.As significantly, they pencil in about half a point of rate cuts from there through 2023.Exaggerated a bit by this week’s U.S.-China tensions over Taiwan, 10-year U.S. Treasury yields dropped almost a full percentage point in just six weeks to as low as 2.51% while inflation-adjusted yields fell back to zero. The inversion of 2-10-year yield curve, often cited as the most accurate harbinger of recession, deepened to most since the dot.com recession at the turn of the century.And significantly, market inflation expectations captured in both five- and 10-year index-linked bonds are both now solidly back below 3% – the latter below 2.5%. What’s more, Brent crude oil prices – down almost 30% from March peaks – dipped back below $100 per barrel this week and wheat futures have returned to pre-Ukraine invasion levels as ships resumed deliveries of Ukrainian grain this week. While recession pricing and the monetary policy squeeze may explain much of this, hardy fans of the much-lampooned ‘transitory’ inflation thesis – abandoned by the Fed and other central banks late last year – feel the latest twist just underlines how the post-pandemic inflation surge remains primarily a supply shock that will ultimately normalise. Overall demand in the economy will prove to be little different when these distortions wash out and super-easy monetary settings from pandemic are removed, they argue.In a presentation to the G20 last month, Bank for International Settlements economist Hyun Song Shin reinforced the supply shock message by showing how inflation jumped even though the rebound in real GDP in both developed and emerging economies remained substantially below the five-year pre-pandemic trend.”The charts…reinforce the message that the recent surge in inflation is not simply a story of excess demand that overwhelmed the pre-pandemic trend supply of the economy,” he wrote. “Rather, it is a case of diminished supply capacity that has not kept pace with the recovery to trend.”SUB POTENTIALCiting that speech, hedge fund manager Stephen Jen at Eurizon SLJ said it seemed odd why consensus now felt an even wider output gap was now necessary when inflation would subside anyway over coming quarters as aggregate supply normalised. “There does not seem to be sufficient appreciation for the fact that the global economy is still operating at levels substantially below its historical potential,” he said. “My own guess is that, over time, much of the inflation plaguing the world now will eventually turn out to be ‘transitory’…driven by supply-side factors that are not permanent, are beyond the control of central banks, and will most likely not contaminate long-run inflation expectations.”For Jen, myriad arguments in support of a new era of higher inflation – from changing geopolitics, ‘de-globalisation’ and supply chain rethinks to ageing demographics, tight labour markets and an energy transition – have mostly been assembled after the inflation surge and remain unproven at best as durable long-term factors.But if inflation does indeed subside again over coming quarters, he argues that higher equities, lower bond yields and a slightly weaker dollar will be the result.While other investors sympathise with this view, they feel the uncertainties are just too great in the midst of a tightening cycle to bet the farm on either outcome just yet. And many asset managers appear reluctant to jump on July’s rally.”We lean more towards fading the rally in risk assets than chasing it,” said Paul O’Connor, head of Multi-Asset at Janus Henderson Investors. “We can envisage a fundamental path higher for risk assets from here, but it is a narrow one.”The problem for anyone trying to work this out is that even if you believe this bout of inflation is just down to temporary supply distortions, unpredictable political calculations make it impossible to time a resolution with any surety. And converts to the idea of a ‘new paradigm’ think the longer those distortions persist, the more inflation expectations will entrench anyway.The energy, food and supply chain skews related to tensions over Ukraine or souring relations between Washington and Beijing over Taiwan – not to mention the outcome of November’s mid-term U.S. congressional elections – mean guesswork more than conviction will likely dominate the rest of the year.The author is editor-at-large for finance and markets at Reuters News. Any views expressed here are his own(by Mike Dolan, Twitter (NYSE:TWTR): @reutersMikeD; Editing by Josie Kao) More

The writer is acting governor of the Central Bank of Pakistan The world is reeling from a confluence of historic shocks. With rich nations distracted by domestic issues and geopolitical rivalries, developing economies risk being left to their own devices. The international order may not be able to survive this neglect.As crisis piles upon crisis, 41 countries are at risk of debt distress. This is the most universally complex policy environment of our lifetime and a consequential moment for the international community.Under normal circumstances, these headlines from the world’s leading global trade and financial institutions would sound like a clarion call for saving the developing world. But these are far from normal times and the proclamations ring hollow.With the attention of rich countries diverted by the Russian invasion of Ukraine and the spectre of prolonged stagflation at home, the rest of the world is falling through the cracks of the global safety net that was so painstakingly erected after the second world war.In particular, the world is not paying nearly as much attention to the problems relating to debt and capital outflows encountered by countries in Asia, Latin America and Africa as it did to similar issues faced by several European countries a decade ago. Multilateral and bilateral donor agencies have been standoffish, leaving many countries in the lurch. It is mind-boggling that the austere balance between financing and adjustment in traditional IMF programmes, suspended in the case of Europe and Argentina more recently, remains very much in vogue. Even more so as historic food and fuel inflation threatens to rip poor societies apart. Despite all the rhetoric of social protection and debt treatments, the tools being used to assess problems in developing countries and the policy options they are being presented by the gatekeepers of the global system remain rigid and old-fashioned. And, perhaps most damagingly, the traditional shareholders of key multilateral agencies seem highly uneasy about engaging with a new world in which China has emerged as a big investor and creditor.This is tragic, since the severe stress that developing economies are facing today is largely a reflection of two forces beyond their control. First, big simultaneous shocks in the form of an uncertain exit from Covid, the commodity supercycle and historic tightening by the US Federal Reserve. And second, an over-reliance on debt markets as opposed to equity flows propagated by the existing global financial system, which leaves countries vulnerable to shifts in sentiment, the global interest rate cycle, and dollar strengthening of the kind we are currently experiencing. This is exactly when the institutions at the centre of the global safety net should be springing into action and providing innovative solutions — but they are not, and the consequences could be profound. At a time when globalisation is already in retreat, forcing poor countries to choose where to turn for assistance is likely to leave lasting scars. Poor countries will not easily forget how they were let down by a system that was meant to increase their living standards and protect them in an emergency. As a result, the world could fragment into rival blocs, which would be extremely harmful for global welfare and security over the long run. Moreover, it would leave us with no hope of addressing climate change, the gravest threat mankind has ever faced, which calls for coming together, not pulling apart. There is still time to prevent this dangerous drift. But it cannot be done without modernising the global order. While this order has helped bind the world together for the better part of the past 80 years, it has produced mixed results in terms of supporting economic convergence across countries, ridding the world of poverty, preventing painful debt crises, and promoting the interests of ordinary citizens over those of multinational corporations. This record needs improving.After the second world war, global leaders came together to remake the world and rehabilitate countries that had fought on opposing sides. A similar spirit is needed today, animated by four key new priorities: building a more development-friendly trading and financial system; establishing a modern safety net that does not immediately force procyclical tightening and genuinely protects vulnerable people; ensuring equitable technology diffusion; and supporting clean energy. In some ways, this remaking should be easier to orchestrate because the world is still a relatively peaceful place. Whether it will happen is anyone’s guess. But the stakes for the world economy have never been higher. More